Making the banking system marijuana friendly

Different strains of pot are displayed for sale at Medicine Man marijuana dispensary in Denver, Friday Dec. 27, 2013.

Photo by Brennan Linsley/AP

In some parts of the United States, it is now legal to sell marijuana to adult consumers. But an unforeseen problem recently popped up that hadn’t received much attention before: businesses that sell pot can’t open a bank account.

Because federal law still classifies cannabis as a “Schedule I” illegal narcotic, federally regulated banks don’t want to do business with pot retailers or dispensaries, even when they’re legal. Indeed, they can’t – banks would be subject to criminal penalties under money-laundering laws.

For policymakers, there are a couple of options. Rep. Earl Blumenauer (D-Ore.), for example, wants to reform the Controlled Substances Act so that marijuana is no longer a “Schedule I” illegal narcotic and banks won’t have anything to worry about. Since that would require congressional approval, it’s unlikely we’ll see this change anytime soon. [See the correction below.]

But in the meantime, Attorney General Eric Holder, who’s been quite progressive on this issue, can help at an administrative level. Reuters reported the other day:

U.S. treasury and law enforcement agencies will soon issue regulations opening banking services to state-sanctioned marijuana businesses even though cannabis remains classified an illegal narcotic under federal law, Attorney General Eric Holder said on Thursday.

Holder said the new rules would address problems faced by newly licensed recreational pot retailers in Colorado, and medical marijuana dispensaries in other states, in operating on a cash-only basis, without access to banking services or credit.

“You don’t want just huge amounts of cash in these places,” Holder told an audience at the University of Virginia. “They want to be able to use the banking system. And so we will be issuing some regulations I think very soon to deal with that issue.”

That’s probably a good idea.

Whatever one might think of the business’ product, commercial enterprises in the United States tend to need a bank account. Imagine the challenges of setting up a shop in Denver, realizing that receiving a bank loan is impossible. If you manage to launch your store and make a profit, you’ll have to conduct all transactions – paying employees, keeping the lights on, selling your product, buying inventory, paying sales taxes – without being able to write a check.

Then imagine how big a target your establishment would be to robberies.

“There’s a public safety component to this,” Holder added. “Huge amounts of cash – substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited – is something that would worry me just from a law enforcement perspective.”

The A.G. didn’t specify when new banking regulations would be announced.

* Update: I heard from Blumenauer’s office this afternoon, which said congressional action on reforming the Controlled Substances Act may not be necessary – the Attorney General’s office can act unilaterally without lawmakers’ approval. With this in mind, it would appear Holder can declassify marijuana as a “Schedule I” illegal narcotic at his discretion and without congressional input.